Anhui Tongyuan Environment Energy Saving Co.,Ltd's (SHSE:688679) Shares Bounce 28% But Its Business Still Trails The Industry

Anhui Tongyuan Environment Energy Saving Co.,Ltd (SHSE:688679) shares have continued their recent momentum with a 28% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 25% over that time.

Although its price has surged higher, Anhui Tongyuan Environment Energy SavingLtd may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Commercial Services industry in China have P/S ratios greater than 3.1x and even P/S higher than 6x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Anhui Tongyuan Environment Energy SavingLtd

How Has Anhui Tongyuan Environment Energy SavingLtd Performed Recently?

We'd have to say that with no tangible growth over the last year, Anhui Tongyuan Environment Energy SavingLtd's revenue has been unimpressive. One possibility is that the P/S is low because investors think this benign revenue growth rate will likely underperform the broader industry in the near future. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Anhui Tongyuan Environment Energy SavingLtd's earnings, revenue and cash flow.

How Is Anhui Tongyuan Environment Energy SavingLtd's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Anhui Tongyuan Environment Energy SavingLtd's to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 52% in total over the last three years. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 35% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Anhui Tongyuan Environment Energy SavingLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Anhui Tongyuan Environment Energy SavingLtd's P/S Mean For Investors?

Even after such a strong price move, Anhui Tongyuan Environment Energy SavingLtd's P/S still trails the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Anhui Tongyuan Environment Energy SavingLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 2 warning signs we've spotted with Anhui Tongyuan Environment Energy SavingLtd (including 1 which is a bit unpleasant).

If you're unsure about the strength of Anhui Tongyuan Environment Energy SavingLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.